Oil Prices Ease Following Gaza Ceasefire Agreement: A Closer Look
Assalamu alaykum, brothers and sisters. On Friday, oil prices softened a bit after Israel and Hamas reached an agreement on the initial phase of a ceasefire in Gaza. While prices gave up some of their weekly gains, experts expect them to recover after a steep drop last week.
Brent crude, which serves as a benchmark for much of the world’s oil, dipped by 0.69% to $64.77 per barrel around mid-morning UAE time. Similarly, West Texas Intermediate, the US crude indicator, slipped 0.65% to $61.11 a barrel.
Oil reached its highest weekly point on Wednesday but then lost about 2% following the Gaza truce announcement on Thursday. Still, the market is on track for a modest 0.7% gain compared to last week's close, which had seen the largest weekly decline in over three months. Year to date, Brent and WTI have both fallen by more than 14%.
Interestingly, oil prices seemed to ignore recent US sanctions targeting Iran-linked groups in Iraq. The US Treasury imposed penalties on a company connected to Iran-backed militias, and even the president of Iraq’s Olympic Committee faced sanctions. Analysts noted that these sanctions had little impact on oil futures, as the market had already factored in the Israel-Hamas ceasefire deal ratified by the Israeli cabinet.
This year, oil prices have been quite volatile due to various factors including ongoing geopolitical tensions in the Middle East, the conflict between Ukraine and Russia, and tariffs introduced by the previous US administration, which affected prices negatively. There’s also increased pressure on countries purchasing Russian oil.
On the production front, OPEC+-including countries like the UAE, Saudi Arabia, Russia, and others-agreed to raise output by 137,000 barrels per day starting November, continuing a trend of lifting production cuts made two years ago. This decision was motivated by stable global economic conditions and healthy market fundamentals, while also keeping the option open to pause or reverse these increases if needed.
While some worry about excess oil supply due to these increases, experts believe these concerns are overstated, as the physical market hasn’t shown signs of oversupply yet. Combined with seasonal drops in US oil demand, this could lead to stockpile increases in the world’s largest crude consumer.
May Allah grant us peace and stability in the region and bless us with barakah in our resources. Ameen.
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